Are you planning to buy term insurance? Or your customer asks you which is cheaper premium paying term is, then read this it will help
Risk Management is the first step to cover all the financial risks for personal and financial benefits. Term insurance is a key product for cover risk Management and for cross-selling for financial advisors.
There are many types of term insurance available in the current market :
One time payment policy (Single Premium )
limited Premium Payment Policy and Full-time Premium
Regular premium paying policy
So Most of the time we are confused about which premium payment is cheaper to pay.
Among all three paying the regular premium till the term of the policy over the term will be cheaper due to the present value of the future premium to be paid.
It's a simple example of the time value of money and as per time value of money calculation regular premium for the entire policy duration is best for the buyer.
Want to How just solve this example
Mr, Kishan asked for various premium options for term insurance. His details are age 35 Year Term of the Policy 35 Yrs Sum Assured 50 Lacs.
He got these premiums for different payment terms
10 Yrs Premium Payment 15,300
35 yrs Premium Payment 8,000
Hint for Calculations:
1. first You can calculate the total premium of each option.
2. Now you have to calculate the present value of each premium on 5 %.
3. Premium which has the lesser present value will be a cheaper premium.